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The development of high growth and highly successful SMEs 413
2 Theoretical framework and former studies
Many of the former growth studies (e.g., Davidsson and Wiklund, 2001; Delmar, 1997)
are mainly concerned only with growth as such, without any wider emphasis on other
dimensions of performance. As Birley and Westhead (1990) point out, success is seen as
a parallel phenomenon with growth. However, they argue that the use of external finance
which could be thought to be a prerequisite for growth correlates negatively with
profitability. Davidsson et al. (2005) notice that even if numerous empirical studies on
small firm growth can be compiled only a few have investigated the crucial relationship
between growth and profitability.
One notable inquiry into the determinants of high growth versus marginal survival
(Cooper et al., 1994) found that the chances of both survival and high growth
were positively associated with a higher level of education, greater industry-specific
know-how and larger initial financial resources. Zhao and Aram (1995) compared
low growth with high growth firms. They found that the range and intensity of business
networks was markedly higher in the firms that grew rapidly.
Sandberg and Hofer (1987) who used return on equity as their performance variable
found no confirmation for the effects of the entrepreneur’s characteristics on venture
performance. But they found support for the interactive effects of venture strategy and
industry structure. Chrisman et al. (1999) extended the theoretical model of new venture
performance proposed by Sandberg and Hofer (1987). The original model combined
several potential explanatory factors that influence the performance of a firm. Their
extended model specified that the performance of a new venture was a consequence of a
confluence of factors that encompass attributes of entrepreneurs, industry structure,
business strategy, resources, and organisational structure, processes, and systems.
Acs et al. (2008) examined firms with significant revenue growth and expanding
employment which they call HIFs. They found about 375,000 US HIFs in 2002 to 2006.
HIFs were discovered in all industries, in almost all regions. Similarly, Chan et al. (2006)
concluded that high growth small firms experience similar management challenges
regardless of the industry, size and revenue level. Acs et al. (2008) found out that HIFs
represent 2% to 3% of all firms, and they account for almost all of the private sector
employment and revenue growth in the economy. Clearly, being a HIF in the previous
four years has a significant impact on firm performance in the subsequent four years, and
the effect is more evident as firm size categories increase (Acs et al., 2008). The study
suggests that there is a connection between the age of the firm and its performance. But
even if they state that HIFs are younger than low impact firms, their average age is
around 25 years.
Wiklund et al. (2009) use relative sales growth and sales growth compared to
competitors, relative growth of employment and value growth (market value) compared
to competitors as measures of growth. They conclude that resources have only an indirect
effect on growth but environmental dynamism appears to have a complex relationship
with changes over time, i.e., growth. Wiklund et al. (2009) argue that entrepreneurial
orientation and growth attitude have a strong direct impact on growth. Littunen and
Virtanen (2009) discovered that the growing ventures were more probably opportunity
driven (pull motivation), used more often external financing (loans and public funding) at
the start-up stage, applied group management style, had increased their production
capacity, were adopting a specialised product policy but focusing on current customers,
and were more open to external discussion. Littunen and Virtanen (2009) concluded that